Cash flow which starts negative then positive than again positive cash flow is classified as

Answer & Solution

Answer: Option C

Solution:

Cash flow which starts negative then positive than again positive cash flow is classified as non-normal cash flow. Non-normal cash flow stream (also called unconventional cash flow) is a pattern of cash flows in which the direction of cash flows changes more than once. It is also termed as unconventional cash flow.

2.

In estimating value of cash flows, compounded future value is classified as its

Answer & Solution

Answer: Option A

Solution:

In estimating value of cash flows, compounded future value is classified as its terminal value. Terminal value (TV), or horizon value, determines the value of a business or project beyond the forecast period when future cash flows can be estimated.

3.

In capital budgeting, a technique which is based upon discounted cash flow is classified as

Answer & Solution

Answer: Option A

Solution:

In capital budgeting, a technique which is based upon discounted cash flow is classified as net present value method. Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

4.

An increase in marginal cost of capital and capital rationing are two arising complications of

Answer & Solution

Answer: Option C

Solution:

An increase in marginal cost of capital and capital rationing are two arising complications of optimal capital budget. The optimal capital budget is an amount of investment that allows shareholder value to be maximized.

5.

An initial cost is Rs 6000 and probability index is 5.6 then present value of cash flows will be